The euro fell below par against the dollar on Wednesday for the third month in a row as the European Central Bank pushed for rate hikes while a burgeoning energy crisis added to recession fears.

On Wednesday, Russia cut gas from the Nord Stream 1 pipeline, escalating economic warfare between Moscow and Brussels and raising prospects of recession and energy rationing in some of the world’s richest nations. .

Concerns that gas flow through the pipeline will not resume after planned maintenance ends on Saturday has made traders nervous.

ING currency strategist Francesco Pesore said: “The narrative that helped the euro earlier this week was an improvement in the gas narrative, but now it’s fading and we believe it will put a cap on the eurodollar.” .

“We will know in the next few days if the resumption of flows at the end of the maintenance period goes smoothly.”

Uncertainty has pushed the euro below par against the dollar. Last time it was down 0.4% to $0.9976.

Meanwhile, Eurozone inflation hit a new record in August, beating expectations and cementing the prospect of another significant rate hike by the European Central Bank (ECB).


Eurozone recession and significant rate hikes very likely…

A growing number of ECB officials are calling for significant interest rate hikes to deal with sharp inflation that could exceed 10% in the coming months.

Financial markets are fully pricing in a 50 basis point rate hike from the ECB, with a 75 basis point rate hike more than 60% likely, according to Refinitiv data.

The Dollar Index, which measures the US dollar against a basket of six currencies, rose 0.3% to 109.10, within the whisker range of Monday’s 20-year peak of 109.48.

The index rose more than 3% in August, continuing its third straight month of gains.

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